New-build home sales slow as prices remain stable

Prices for new construction homes in the Toronto region remained stable in July but sales have slowed dramatically — down 44 per cent year over year for single-family and highrise housing combined.

Less than half the number of homes were sold in the first seven months of this year compared to the same period of 2017, prompting the building industry to reinforce its long-standing message again Wednesday that the provincial and municipal governments must boost supply.

As well as ensuring that infrastructure is available for new building, zoning in many places needs updating to match provincial growth targets, and building taxes and fees need to be reassessed. (Rich Pedroncelli / The Associated Press file photo)

“Although it is a very complex equation on how do we balance the market, you can’t use the complexity of the solutions not to act,” said David Wilkes, CEO of the Building and Land Development Association (BILD).

The GTA housing market is still a combination of two separate story arcs — one for highrise and another for single-family homes, a category that includes detached, semi-detached, link and town houses, he said.

“Condo sales are continuing. The prices are holding there, whereas the single-family is beginning to pick up. But I would call it stable more than anything else,” said Wilkes.

“Both are being affected by the policy direction and the market conditions that we have seen over the last year which have focused on the demand side,” he said, citing the mortgage stress test rules introduced in January and rising interest rates, which have reduced many consumers’ buying power.

Sales of new single-family homes — detached, semi-detached and town houses — actually rose 85 per cent year over year. But those 216 July sales compare to last year’s decade-low of 117 sales. This year’s numbers are still 77 per cent lower than the 10-year average.

The price of a single-family home in July — $1.14 million on average — didn’t budge much from June, but it was 13.2 per cent below last July’s average price of about $1.32 million.

Article Continued Below

The traditionally slow summer was slower than usual this year, said Patricia Arsenault, vice-president of Altus Group, which tracks building industry statistics. She blamed the rising cost of condos and the fact that only two new housing developments launched last month, a luxury townhome project and a condo building, both in Toronto.

Altogether there were 14,784 housing units available to buy in July. About two-thirds were condos (a category that also includes stacked townhomes). Of those, only 405 were in completed buildings. The rest were pre-construction or under construction.

“Given the current pace of sales, we should have nine to12 months’ worth of inventory, but we only have five. We expect that more condo apartment product will become available in the fall,” said Wilkes.

The average condo price in July was $774,759 — more than $100,000 higher than last July’s $665,041 and about the same as this June’s average of $774,554.

The 2,395 single-family homes sold in the first seven months of this year represent a 61 per cent decline from the same period last year and 74 per cent lower than the decade average of 9,246.

The approval process for new home construction remains a major obstacle to getting more homes on the market, said Wilkes.

“There is just a stickiness in the system that is preventing supply from coming on stream,” he said.

As well as ensuring that infrastructure is available for new building, zoning in many places needs updating to match provincial growth targets, and building taxes and fees need to be reassessed.

Government charges add $186,300, about 21.7 per cent, to the average price of a single-detached home and $122,800, or about 23.9 per cent, to a condo in the Toronto area, according to a report from BILD in May.